London's taxes prop up the rest of the UK: One pound in every five earned in the capital funds the rest of the country

One pound in every five earned by Londoners is used to fund the rest of the country, a report has revealed.

The figures from the Centre for Economics and Business Research (CEBR) expose the widening North-South divide in the UK, where the prosperous South props up poorer parts of the country.

CEBR produces an annual calculation that shows public spending in the UK by region as a share of regional gross domestic product (GDP). The most recent calculation, based on data released last May, showed how different the dependence on public spending is between the different parts of the country.

Subsidising: A fifth of income earned in London is used to fund the rest of the country

The biggest beneficiaries are Northern Ireland, Wales and the North East, which receive more than a fifth of their income as subsidies from the taxpayer.

Northern Ireland pays tax worth just 27.7 per cent of GDP generated by Northern Ireland. This compares to London, which pays tax equivalent to 45.2 per cent of GDP created in the capital.

Additionally, the analysis showed that regions where the level of tax paid was low as a proportion of GDP also used a higher proportion of GDP for state spending.

For some taxes, the regional differences are huge. The bulk of Stamp Duty Land Tax is paid in London and the South East. The 50p income tax rate is also largely a London and South East tax.

Overall, London provides a net subsidy of 20.3 per cent of GDP. Northern Ireland receives a net subsidy of 29.4 per cent, while Wales receives a subsidy of 26.0 per cent and the North East 22.2 per cent.

Table to show the scale of subsidy between different regions of the UK.

The figures will be relevent to the ongoing discussion of independence for Scotland. Scotland receives no net subsidy. Using and established Aberdeen University split of the oil and gas revenues - which gives Scotland 83 per cent - the oil and gas revenues exactly cancel out the fiscal transfers from the non oil sector.

Meanwhile, a separate report warned that job prospects are set to worsen in the coming months with more redundancies expected to push unemployment levels closer to the three million mark.

The Chartered Institute of Personnel and Development claims that almost a third of private sector firms intend to make redundancies in the coming months.

It found that job prospects were brighter in London and the South of England, while firms in the North were less optimistic.